Should I renovate or refurbish? . . .

I have been asked to write a piece about refurbishing a hospitality business. How much space have we got? I’ll give it a go within the bounds of this page, but I’ve probably got a different slant on the whole process than you may have because I am going to tackle the subject from a business management point of view, rather than a design, decorating or fit out perspective.

How far should you go?

The first issue that springs to mind is an examination of the reasons why you need to consider refurbishing in the first place. I accept that all businesses get tired and all businesses need to maintain touch with the fashion of the day. Fashion commands a premium in pricing; once you fall out of fashion you need to bring your prices down to deliver a perception of value for money.

Given this, the question you need to consider is how far should you go? I’ve seen businesses revitalised with as little as a coat of paint, new

It might tickle your ego, but is it commercially sensible?

It might tickle your ego, but is it commercially sensible?

carpet, re-upholstered chairs and some second hand kitchen equipment.  At the other end of the scale I’ve seen people go right over the top with a thorough gutting of the property and what amounts to a complete re-building and interior design project using the most expensive designs, contractors and materials they can gather together. Their justifications can be bizarre: ‘Ah, yes — but look at the publicity we got.

Where do you get the best return?

To my way of thinking decisions about how far you should go all boil down to one basic question: ‘Where can you spend the minimum amount of money in your business for the greatest return?’ Are you running a business or an arthouse charity to the dining public?

Beware — there is a hidden trap here. If you are assuming that your, décor, environment or the state of your kitchen are the limiting factors on your profitability, growth and success and these assumptions turn out to be invalid, you could end-up shooting yourself in the foot.

Keep an eye on what is really important

Great service and food quality are more important than décor.

Great service and food quality are more important than décor.

I’m very conscious of this because my company has been involved with perception surveying for hospitality businesses for over thirty years now. One of the main things I have learned from the results of thousands of these surveys is that the décor or environment in a hospitality business comes a long way third in your average customers’ perceptions — way behind the standard of human interaction and product quality. Perhaps you would do better to invest your money in these areas, rather than in refurbishing?

Whatever you choose to do it has to be within the bounds of commercial reality — that’s absolute, or you will have a short but distinguished career in hospitality. How much are you proposing to spend and how long will it take you to get it back? A complete refurbishment can cost a small fortune and you will have to sell a lot of food and beverage to pay for it.

Do a proper feasibility study

We often see serious money thrown at refurbishment projects when we know the business is not remotely capable of repaying it within a reasonable time. For this reason it is always a good idea to get a professional who knows what they are doing to do the sums (a feasibility study) on the cost effectiveness of your plans and establish the projected return on your investment before
you begin.

I also believe that all refurbishment projects should have a safety margin built

Smart people do their homework and get advice.

Smart people do their homework and get advice.

into them because Murphy’s Law seems to be the governing factor — whatever can go wrong probably will go wrong, and your project will invariably take a lot longer and cost a whole lot more than was first envisaged or provided for. Put it this way: A much, much higher percentage of projects blow the budget than come in on time, to projected cost.

It can be done cheaply

Astute renovators will produce a brilliant result on a shoestring by buying at auctions, avoiding the celebrity contractors and doing some of the work themselves. A difficult economy like we have at present means that there is a lot of opportunity to buy near new equipment and items like tables and chairs that are coming available from other businesses that have gone out backwards.

The main reasons why people go overboard with renovating or decorating projects boil down to a combination of ignorance driven by ego and vanity. Sure, it’s nice to hob nob with the glitterati and be regarded as ‘cutting edge’. I’d be a fool if I didn’t recognise status as a major driving force in this industry — and it’s OK to think this way, providing you can afford it.

What if you lease?

Be very careful of renovating someone else’s asset.

Be very careful of renovating someone else’s asset.

Another issue to consider is that most hospitality businesses are located in leased premises and I’ve always failed the see the logic of lavishly capitalising someone else’s asset. I do recognise that this is often done with the intention of staying in that location for a period of years, but excessive expenditure on refurbishing can foreshorten the life of your business and make the term of your lease a totally irrelevant issue.

The cleverest operators I deal with keep an eye out for someone else who has spent a fortune on renovating and decorating and then gone broke (as they tend to do). They then pick up the premises, equipment, etc for fire sale prices and proceed to make a decent profit from the business, because on the diminished cost structure they have compared with the original owner, they can make a profit.

Ultimately I can summarise by the following:

Make sure refurbishing is the priority issue that needs addressing in your business, and make sure you are not refurbishing a business for someone else’s ultimate benefit.